Durable goods orders rise 0.3% less than expected

Consumer spending makes up for exports, June numbers show

July 29, 1999|By BLOOMBERG NEWS

WASHINGTON -- Orders for U.S. durable goods rose at a slower-than-expected pace in June, restrained by reduced demand for industrial machinery, government figures showed yesterday.

The Commerce Department said orders for durable goods -- items expected to last at least three years -- increased last month to a seasonally adjusted $196.9 billion.

Total orders for durable goods rose 0.3 percent after a 0.8 percent gain in May, the department said. The June increase was less than the 1 percent rise expected by analysts.

"We haven't really turned the corner yet on exports, and that's the key factor holding manufacturing back," said Greg Jones, chief economist at Briefing.com in Jackson, Wyo.

South Americans, especially in Argentina and Brazil, are struggling with a drop in commodity prices as are U.S. growers. Argentina is the world's biggest corn exporter after the United States and the third-biggest soybean exporter.

The U.S. trade deficit in goods and services widened in May to a record $21.3 billion as exports fell for the sixth time in seven months, the government reported last week.

Demand from U.S. consumers, however, continues to make up for slumping exports, keeping the economy's 8-year-old expansion on track toward a record early next year.

U.S. companies' second-quarter profits rose a greater-than-expected 16.4 percent, the biggest gain in almost four years and well ahead of analysts' 12 percent forecast, as consumers snapped up everything from computers to McDonald Corp.'s "Happy Meals" to pickup trucks.

One reason for those gains is a continuing increase in worker productivity, which is holding down inflationary pressures as the economy powers ahead, Federal Reserve Chairman Alan Greenspan told Congress yesterday.

Greenspan saw no reason why those productivity gains should not continue, a necessity if inflation is to be kept in check.

The U.S. Treasury's benchmark 30-year bond was little changed yesterday, with its yield at 6.00 percent. Stocks were mixed. The Dow Jones industrial average fell 6.97 points, or 0.06 percent, to close at 10,972.07, while the Nasdaq rose 26.51 points, or 0.99 percent, to close at 2,705.84.

The durable goods report also showed orders for nondefense capital goods falling 4 percent after a 2.8 percent decline in May. The category, which excludes aircraft, is a gauge of investment.

Industrial machinery orders, which include computers, fell 5.4 percent in June after a 4.5 percent decline a month earlier. Offsetting that weakness were June durable goods orders for electrical equipment, including home appliances, which rose 2.1 percent in June, and a 2.7 rise in the transportation sector, including autos.

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